Balkans Real Estate Industry At Risk

By Jonilda Koci

The economic crisis in the Balkans is placing the real estate industry at a serious risk, a sector that has seen its share of difficulties since late 2008. The cost of real estate has fallen by 30% to 50% across the region.

From Greece to Romania, plans for developing industrial or tourist projects have stopped or have been postponed. If the trend continues, future prospects in the industry seem bleak across the region, experts warn.

“Economic and financial crises kept away initiatives for expansion of a number of companies that expressed their investment interest,” Ilda Bicoku, a Century 21 real estate broker from Tirana said. “Investors are waiting for a better day.”

As recently as five years ago, Montenegro was the regional investment hub in real estate construction. With Montenegro’s independence in 2006, a rush of Russian buyers purchased real estate, pushing the average price to 1,000 euros per square meter in Podgorica and to 2,500 euros on the coast. Today, real estate prices in coastal cities like Bar and Ulcinj have plummeted by 80%.

The situation is no better in neighbouring Croatia. According to sales agencies data, about 50,000 flats are vacant. Economy experts say that EU accession will not bring drastic changes to the real estate sector.

“Croatia is already a fully liberalised market, and whoever has the money can invest in construction. Foreign investment laws will not change much with the EU entry, so I don’t expect an investment boom will happen next year,” Zeljko Lovrincevic, professor at the Economics Faculty in Zagreb, told SETimes.

Serbia is seeing state-financed construction work, but private investors are building little. “Serbia’s real estate market is facing serious problems,” Goran Rodic, chairman of the construction committee at the Serbian Chamber of Commerce, told SETimes.

Small facilities with few apartments are built in the suburbs, he said, adding that the price of high-end apartments at exclusive locations have fallen due to a lack of buyers.

Four years ago, the Bulgarian property market was vibrant and thriving, but quickly deteriorated when the global turmoil began in late 2008.

According to Polina Stoykova, chief operations manager of the Sofia-based real estate agency Bulgarian Properties Ltd, “Accumulated real estate price decrease since the beginning of the crisis is 42.8% on average for the country, and 45.6% for Sofia.”

Official data suggest that the average market prices in Bulgaria continued to slide in the first quarter of 2012, reaching 452 euros per square metre, down from 463 euros in 2011, well below the pre-crisis average of 697 euros in 2008.

Bucharest’s market is facing difficulties, as “less new houses are built, the number of building permits decreased this year, primarily because there is a stock of unsold apartments,” Alexandru Petrescu, manager ESOP Consulting, told SETimes.

Gonen Tzur, manager of a real estate agency in Pipera, told SETimes that since the end of 2008, rental rates declined by 50% to 60%, shifting average rents from 1,500 to 3,500 euros per month to 1,000 to 2,500 euros.

Tens of thousands of real estate properties in Greece continue to await buyers despite their low prices and the willingness of brokers to negotiate better terms.

The Hellenic Real Estate Association published information indicating the country’s wealthy — who have until recently invested in luxury real estate — are attempting to sell it: 25,000 luxury villas are up for sale in what real estate brokers call “an epidemic.”

In Macedonia, the economic crisis did not affect the real estate sector. Intense building construction is under way, and the price per square metre has not dropped, at least not in the Skopje city centre, remaining at 1,000 to 1,200 euros, or even up to 1,800 euros per square metre in certain districts.

Liljana Kovaceva, from Dom Dizajn real estate agency, said that the demand for apartments has also not stopped.

“It seems that real estate investments are the safest for now, so people continue buying apartments,” she said. Similarly, in the tourist centre Ohrid, both the building and the demand for apartments continues.

SETimes correspondents Drazen Remikovic in Podgorica, Bojana Milovanovic in Belgrade, Svetla Dimitrova in Sofia, Gabriel Petrescu in Bucharest and Marina Stojanovska in Skopje contributed to this report.